IBM provides the following standard and actual data for the production of 2,000 units:
•Standard costs: Direct materials (4 pounds @ $3 per pound), Direct labor (2 hours @ $15 per hour)
•Actual data: Direct materials (8,500 pounds @ $3.20 per pound), Direct labor (4,200 hours @ $14.50 per hour)
Required:
1.Calculate the material and labor variances.
2.Analyze the possible reasons for these variances.
3.Discuss how IBM can use variance analysis to improve cost control and performance evaluation.